FreightWaves Classics/Fallen Flags: US Shipping Board controlled US shipping for nearly 20 years

The U.S. Shipping Board (Shipping Board or USSB) was established on April 16, 1917, as an emergency government agency in accordance with the provisions of the Shipping Act of 1916, which was passed by Congress on September 7, 1916. The corporation’s mandate was to “acquire, maintain and operate a fleet of merchant ships to meet the needs of national defense and foreign and domestic commerce.” 

Background

By the 1910s, U.S. vessels had been at a disadvantage to foreign ships and the nation’s maritime strength had been eroding for decades. This caused concern among some in Congress (although some of its “remedies” actually worsened the situation, giving an advantage to European shipping). The nation was heavily dependent on foreign shipping (as it is now). European shipping companies dominated global ocean trade; only about 10% of the value of trade was shipped in U.S.-owned ships. 

When World War I began in 1914 the fleets of the warring nations became involved in those countries’ wartime efforts and were therefore withdrawn from the commercial trade that was vital to U.S. commerce. Congress began exploring alternatives to increase the number and importance of the U.S. fleet. One of the first steps was granting authority to the president to allow registration of foreign-built ships owned by U.S. companies to enter the United States registry and operate as a U.S.-flagged vessel. However, the legislation had a negligible impact; U.S. shipbuilding actually declined as a result.

The Shipping Act of 1916 was the solution Congress enacted. At the time of its passage the United States was a neutral nation and had not yet been drawn into the war. The overview of the legislation included: “An Act to establish a United States Shipping Board for the purpose of encouraging, developing, and creating a naval auxiliary and naval reserve and a Merchant Marine to meet the requirements of the commerce of the United States with its territories and possessions and with foreign countries; to regulate carriers by water engaged in the foreign and interstate commerce of the United States for other purposes.”

The president of the United States was authorized to appoint a board of five commissioners who were to be confirmed by the U.S. Senate. The USSB was to “acquire and construct suitable vessels and to create corporations under its control to execute the programs.” The USSB was given “complete control over American ships and shipping.” 

President Woodrow Wilson announced his nominations for the USSB’s commissioners on December 22, 1916. Many of the leaders of the shipping industry were concerned about some of the nominees, as well as the board’s power to set ocean freight rates. The president’s nominee for the board’s chair was William Denman, who had been instrumental in drafting the legislation that established the USSB.

Denman and the other nominees met in Washington during the first week of January 1917 to plan and organize the USSB while awaiting confirmation. All five nominees were confirmed and the USSB was formally organized on January 30, 1917.

World War I

Prior to the U.S. entry into World War I shipbuilding had been expanded somewhat; domestic shipping companies replaced ships withdrawn from trade by the countries fighting in the war. Moreover, both the United Kingdom and neutral countries contracted for ships to be built in U.S. shipyards. The ships needed by the U.K. had been contracted for through private British companies – both for security and U.S. neutrality laws. 

In March 1917, just before the U.S. entered the war and the USSB’s shift to wartime operations, there were about 700,000 tons of new construction going on for the private U.K. owners. In addition, all of the 234 building ways (slips) in the U.S. were occupied by either those ships being built for the U.K. or ships being built for neutral or domestic shipping lines. Therefore, there was no way to quickly expand U.S. shipbuilding capacity.

The United States entered the war on April 6, 1917, just over two months after the USSB began its work. Becoming a combatant in the war completely changed the focus of the USSB – from general improvement of the country’s maritime position to a massive wartime shipbuilding program. Although it was sometimes referred to as the War Shipping Board, the official title of the agency remained the United States Shipping Board.

To address the shortage of shipping, the USSB took the controversial step of acquiring the ships that were currently under construction across the nation. With the U.S. declaration of war a construction program began through the Emergency Fleet Corporation (EFC), a USSB subsidiary that was created on April 16, 1917. 

The precedent for such a corporation had been established during the construction of the Panama Canal. The stock of the Panama Railway Company, which had been charged with much of the canal’s construction, was entirely owned by the Secretary of War. In addition, the Shipping Act had specifically empowered the USSB to establish such a company; that was done through the issuance of $50 million in stock that was initially held by the USSB. 

Congress granted President Wilson extensive wartime powers. He used Executive Orders to expand the authority of both the USSB and the EFC. As a regulatory and policy agency, the USSB executed its programs largely through the EFC, a separate entity that was completely under the policy control of its majority stockholder (the USSB). 

However, the division of authority between the USSB and EFC and the direction of the EFC’s construction program led to conflicts between USSB Chairman Denman and the EFC’s General Manager, Major General Goethals. Both men resigned, and the board and corporation were reconstituted. Edward N. Hurley became chairman of the USSB, while Rear Admiral Washington L. Capps, formerly Chief of the Navy’s Bureau of Construction, became the EFC’s General Manager.

Ship seizure and the building program

The initial action of the USSB in regard to new construction was to commandeer every contract, hull and even steel in U.S. shipyards. This order was signed on August 3, 1917; the EFC secured control of the shipyards and the ships then under construction. The EFC’s actions were protested by almost all of the U.S. shipyards, as well as the owners of the foreign ships under construction (via the U.S. State Department). Many of the ships under construction were for the United Kingdom; its protest was remedied by the U.S. government’s pledge that the ships would be used in the total war effort. 

Out of 431 ships being built, 414 were requisitioned and completed. Construction of the remainder was canceled because these ships’ were either an unwanted design or construction had not yet begun. 

Of the ships being built in the U.S. at the time the nation entered the war, 91 were being built for German companies. They were seized and refurbished for use by the USSB under legislation passed by Congress on May 12, 1917, as well as a presidential Executive Order issued on June 30, 1917. That Executive Order gave the USSB the power to “formally seize the vessels and enter them into the U.S. registry.” 

The USSB’s report of December 1918 listed one Austrian steamer, 87 German steamers (including four seized in Cuba, and seven sailing vessels seized in U.S. ports). Some of Germany’s premier liners were among the ships that were seized.

In addition, on November 15, 1917 the USSB began negotiations with other nations that had seized German or Austrian ships. As a result, a number of those ships (which were being held by countries from South America to China) were either chartered or purchased.

In addition to taking over the construction of the more than 400 ships that were being built at the beginning of the U.S. involvement in the war, the USSB began an ambitious program to establish new naval construction yards. The largest of these was near Philadelphia and named Hog Island. 

The last ship built under the USSB/EFC shipbuilding program was delivered on May 9, 1922 by Bethlehem Shipbuilding Corporation at Sparrows Point, Maryland.

Post-construction

When ships were delivered to the USSB from the various shipyards, they came under the management of the USSB’s Division of Operations. It allocated the new ships to the “War Department, Navy Department or commercial service based on needs and the class and type of ship.” By December 1918 (the month after the end of the war), the USSB Division of Operations had become the largest ship operating entity in U.S. history. Its fleet included 1,386 vessels that were either owned outright, managed or chartered.

To control shipping traffic required for the war effort, British methods were used. Rates were adjusted and control was exercised through the division’s Chartering Committee, whose approval was necessary to obtain a license to refuel in U.S. ports. Because U.S.-registered ships were already under significant control, the Chartering Committee’s regulations were aimed primarily at neutral ships. Rate enforcement was strict; prior to better compliance 136 steamers were held in U.S. ports for violating Chartering Committee regulations. 

The USSB also established a Maritime Intelligence Department within the Division of Operations, as well as a Division of Planning and Statistics. It collected and analyzed shipping data to assist in the determination of what level of shipping was needed for commercial use and how much could be shifted to the war effort.

Ships’ crews

Beginning on June 1, 1917, the USSB established a recruiting service to find merchant marine crews for the new ships because traditional methods were too slow. The recruiting service was headquartered in Boston; the first of 43 training centers was established for deck officers in Cambridge, Massachusetts on June 4, 1917. 

A second set of schools was established for engineering officers; those engineers destined for turbine-powered ships were sent to the companies that built turbines for training. Between June 1, 1917 and October 1, 1918, over 11,600 licensed officers graduated from the USSB schools. In addition, the training for officers was expanded to provide training for crew, deck sailors, firemen, wipers, cooks and stewards. By December 1917 these schools were open to all male U.S. citizens between the ages of 18-20 and 32-35. The USSB goal for trained seamen expanded from 85,000 to 200,000 because of the number of ships built by the end of the war.

The USSB employed special labor consultants and entered into agreements with labor and other government agencies to ensure labor issues did not disrupt necessary war shipping. The USSB also standardized wages across the industry.

The USSB post-war and eventual abolishment

After World War I ended, the USSB operated as a shipping business, using its surplus ships. This continued until 1920, when the overseas freight market collapsed and the USSB began to “mothball” many of its vessels. In 1925 Henry Ford bought 199 of the out-of-service vessels for $1.7 million in an attempt to use the ships’ materials for the manufacture of automobiles. 

On February 11, 1927 the USSB was renamed the U.S. Shipping Board Merchant Fleet Corporation by an act of Congress. 

That entity was superseded in 1933 by the U.S. Shipping Board Bureau of the Department of Commerce. The USSB program ended on March 2, 1934; the new bureau in the Department of Commerce was subsequently abolished on October 26, 1936. The board’s functions were transferred to the new U.S. Maritime Commission, pursuant to the Merchant Marine Act of June 29, 1936. 

A complete list of the successor agencies to the USSB includes the U.S. Shipping Board Bureau of the U.S. Department of Commerce (1933-36); the U.S. Maritime Commission (1936-50); the U.S. Federal Maritime Board of the Department of Commerce (regulatory functions only, 1950-61); the U.S. Federal Maritime Commission (regulatory functions only, 1961- ); the United States Maritime Administration of the Department of Commerce (all other functions, 1950-81); and the U.S. Maritime Administration of the U.S. Department of Transportation (all other functions, 1981- ).

Legacy

The United States Shipping Board was the first federal agency charged specifically with the supervision of the nation’s merchant marine. During World War I it controlled the Emergency Fleet Corporation and carried out World War I merchant marine policy. Its authority continued until 1934. 

Source: freightwaves - FreightWaves Classics/Fallen Flags: US Shipping Board controlled US shipping for nearly 20 years
Editor: Scott Mall